Associated British Foods 16-week Revenues Climb - Update

1/19/2012 3:10 AM ET

Associated British Foods Plc (ABF.L,ASBFY.PK) on Thursday said its revenues for the 16 weeks ended January 7 increased 12 percent, thanks to exceptional sales performance mainly from its sugar division and its retail division Primark. The British food retailer added that its trading performance for the period were in line with expectations. Looking ahead, the company expects growth in sales and adjusted operating profit for the full-year.

In its interim management statement, the company noted that revenues from Sugar division climbed 21 percent from last year, with higher regional sugar prices, particularly in Europe. In the UK, annual sugar production is estimated at 1.25 million tonnes compared to just under one million tonnes last year. The company projects strong profit delivery for the financial year, driven by good volumes, high sugar content in the beet, a strong factory performance and high prices

In Spain, profit is expected to be well ahead of last year benefiting from higher sugar prices and improvements in operating efficiency. In China, sugar production in the north east would be significantly ahead, while cane yields in south China continued to be affected by the drought, it said.

Agriculture revenues grew 22 percent for the period, as each business achieved good revenue growth led by K W Trident and AB Vista - its international micro-ingredients feed business.
Grocery revenues increased 4 percent driven by improved performance in the US, UK and developing markets. However, Kingsmill margins were affected by strong competition driven by a high level of promotion and trading remained difficult for George Weston Foods.

Ingredients revenues rose 2 percent despite the ongoing difficulties in the yeast and bakery ingredients business that saw higher raw material cost and a highly competitive trading environment in many markets. The company now expects some operating profit margin decline in the first half.

Sales at Primark grew 16 percent for the 16-week period. The company noted that good like-for-like sales growth reflected strong trading over the Christmas period after a slower start to the financial year as a result of the unusually warm autumn. The company plans further store openings for the second half, including three stores in Spain in March. In the division, operating margin as expected was lower than last year reflecting the continued absorption of higher cotton costs.

Looking ahead, the company said, "Economic uncertainty, particularly in the eurozone, and continued pressure on consumer disposable incomes are expected to remain key features of this financial year. We expect growth in sales and adjusted operating profit in the coming year, with the profit improvement weighted towards the second half."

In London, ABF shares are trading at 1,147 pence, up 10 pence or 0.88 percent.